Skip to main content

Posts

Showing posts from August, 2013

Big pictures, Small details, – The Nuts And Bolts Of Valuing A New Set Up

When you study accounts, you are taught to pay attention to every tiny detail. Every bit of finished goods needs to be derived from raw materials, work in progress and the reach its current state. Every invoice and value has to tally up. All the small things somehow have a multiplier effect on the balance sheet and errors show up if things are missed. Unlearning this habit when developing a valuation assessment for a set-up, is not an easy process – but a necessary one. I am not saying in any way that misrepresentation is required, simply that generic assumptions, and missing some tiny details when creating a financial model for valuation/investment purposes is perhaps more prudent and quick. Because really, for valuation, the multiplier effects of the smaller things are really minimal. The question to ask when dwelling on a small issue is – is this going to materially impact the value of the company. This is especially true for newer set ups where all the smaller elements are not